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GMAC warns on mortgage business | GMAC warns on mortgage business |
(10 minutes later) | |
GMAC Financial Services has reported an increased loss for the third quarter and warned that its mortgage business, Rescap, may struggle to survive. | GMAC Financial Services has reported an increased loss for the third quarter and warned that its mortgage business, Rescap, may struggle to survive. |
The firm reported a loss of $2.52bn (£1.56bn), against a $1.6bn deficit a year ago, with Rescap losing $1.91bn. | The firm reported a loss of $2.52bn (£1.56bn), against a $1.6bn deficit a year ago, with Rescap losing $1.91bn. |
GMAC said there was "substantial doubt" as to whether Rescap could "continue as a going concern". | GMAC said there was "substantial doubt" as to whether Rescap could "continue as a going concern". |
GMAC was formerly part of General Motors. In 2006, GM sold a 51% stake in GMAC to Cerberus Capital Management. | GMAC was formerly part of General Motors. In 2006, GM sold a 51% stake in GMAC to Cerberus Capital Management. |
The car company still holds a 49% stake in GMAC. | The car company still holds a 49% stake in GMAC. |
Rescap was reported to be the seventh-largest mortgage lender in the US at the beginning of this year. | |
Analysts suggested it could follow lenders Washington Mutual and IndyMac who failed earlier this year. | |
"If GMAC can't provide the support that Rescap needs, then bankruptcy is an option for Rescap," said analyst Christopher Wolfe from Fitch Ratings. | |
'Unrelenting environment' | 'Unrelenting environment' |
GMAC has been hard hit by the US housing slump and the resulting credit crunch. | GMAC has been hard hit by the US housing slump and the resulting credit crunch. |
The company's chief executive, Alvaro de Molina, said that "economic and market conditions created an unrelenting environment for our business". | The company's chief executive, Alvaro de Molina, said that "economic and market conditions created an unrelenting environment for our business". |
"In this climate, our primary objective is to make prudent use of our resources and take the steps needed to address the reduced access to liquidity." | "In this climate, our primary objective is to make prudent use of our resources and take the steps needed to address the reduced access to liquidity." |
The company's car finance unit lost $294m in the three months to September, stemming from a rise in credit losses in North and Latin America. In the same period a year ago it had made a $554m profit. | The company's car finance unit lost $294m in the three months to September, stemming from a rise in credit losses in North and Latin America. In the same period a year ago it had made a $554m profit. |
GMAC has cut back its lending, and this has had an unwelcome knock-on effect on General Motors. | GMAC has cut back its lending, and this has had an unwelcome knock-on effect on General Motors. |
Earlier this week, GM said that the cutback in GMAC's lending was behind about half of the 45% fall in car sales seen during October. | Earlier this week, GM said that the cutback in GMAC's lending was behind about half of the 45% fall in car sales seen during October. |
"It was like someone turned off the lights," GM's North America sales chief Mark LaNeve said on Monday. | "It was like someone turned off the lights," GM's North America sales chief Mark LaNeve said on Monday. |